Wilkinson Asks Legislature for $1-Billion Increase in Taxes

Gov. Wallace G. Wilkinson of Kentucky has called on the legislature
to raise taxes by nearly $1 billion over two years.

Most of the new revenues would be used for education, including the
package of major reforms currently being devised by a state task force
and soon to go before the legislature.

The state supreme court has ordered the legislature to redesign
Kentucky's school system, including eliminating funding disparities
among districts.

Mr. Wilkinson's proposal, outlined in his budget address to the
legislature this month, appeared to some to conflict with his 1987
campaign pledge not to raise taxes.

When the supreme court handed down its landmark decision last June,
however, Mr. Wilkinson indicated that he would support the necessary
revenue measures.

The tax package includes changes needed to make state tax laws
conform to the federal tax code; elimination of the deductibility of
federal income taxes on state returns; extension of the sales tax to
advertising, consulting, and other services; a 1 percent increase in
the corporate income tax; and a 7-cent raise in the cigarette tax.

The proposal also contains a low-income tax credit that, Mr.
Wilkinson estimated, would reduce taxes for half of the state's
residents.

"After two years of cutting and trimming and reducing, and then
going back and cutting some more," Mr. Wilkinson said in his address,
"we must face the harsh reality that, even our leaner, tougher state
government will require $482 million a year in new revenue."

At an earlier press conference, the Governor said his proposal would
set a "bold new course of the future" by closing "loopholes on the few
who aren't paying their share."

Efforts to raise broad-based taxes, such as on sales or income,
represent the "old, worn-out, discredited way of the past," he
added.

In his budget plan, the Governor slated $780 million in new funds
for education during the two years that begin on July 1--a 25 percent
increase over the last biennium.

Of that increase, $512 million would be new money in excess of that
needed to cover inflation-related increases in salaries and program
costs.

Early Childhood Targeted

In his address, the Governor specifically referred to a few
education programs he would like to see enacted. He said he would defer
most of the discussion on reform, however, until the
legislative/executive task force completes its recommendations.

Mr. Wilkinson noted that he has budgeted $51 million in lottery
proceeds to initiate a statewide program of early-childhood education
for at-risk 4-year-olds.

He also suggested the development and implementation of a new
statewide testing program that would allow comparisons with other
states.

In addition, the Governor proposed two new higher-education programs
designed to help students attend college. He also said he is forming a
new cabinet for workforce development, and urged redesign of vocational
and technical programs.

Mr. Wilkinson called for reforms in the property-tax system, and is
expected to unveil a more detailed legislative proposal soon.

But he said he would oppose any changes in a state law that
essentially requires local tax rates to be lowered to correspond with
increased assessments, so that governments do not receive windfalls
through reassessments.

In its decision, the supreme court described the law as a deterrent
to raising school funds.

The revenue package drew praise from many legislators and education
activists--including the lawyer for the group of school districts that
filed the school-finance suit that led to the court-ordered
redesign.

Several legislators said last week that some form of the revenue
package is likely to pass. They noted, however, that the proposed
increases in cigarette and sales taxes will be difficult to enact.

One lawmaker predicted that the revenue proposals will probably be
considered as part of an overall education-reform bill.

Ending speculation that most of the reforms would be passed in a
special session after the May primaries, legislative leaders said last
week that the entire package would be taken up during the regular
session. The session concludes in late March.--rrw

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